Credibility was key to minimum euro rate, says SNB’s Schlegel

The decision by the Swiss central bank to introduce a minimum rate to the euro last September was possible because of the SNB’s credibility, says the central bank’s head of foreign exchange and gold

The Swiss National Bank (SNB) will continue not to tolerate an exchange rate below CHF1.20 to the euro, according to Martin Schlegel, head of foreign exchange and gold at the SNB.

Speaking at the FX Invest conference in Zurich, Schlegel stressed the decision to introduce a minimum rate against the euro on September 6 was not taken lightly – and was only decided after various monetary easing measures had failed to weaken the Swiss franc.

“The SNB tried absolutely everything before it introduced the minimum rate, because the minimum rate is really a very harsh measure that is not taken lightly,” he told delegates.

Having taken the decision, however, the SNB will not allow the Swiss franc to fall below the 1.20 level – a policy that is possible to maintain because of the credibility of the central bank, he said.

“What are the lessons the central bank can learn from the minimum rate? I think there is only one real lesson, and that is credibility. The SNB’s credibility allowed it to take these measures and introduce the minimum rate, and so far this has been quite successful,” he said.

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